2023 Review and 2024 Predictions

by JDH on December 30, 2023

Let’s start with the 2023 year in review: overall, it was not a great year.

The SPX was up 25% this year, so you would think it was a great year.  Unfortunately, I did not “bet the farm” on the SPX.  The TSX was up 8%.  What accounts for the difference?  The gain in the SPX was largely attributable to the Big Seven stocks; the rest of the market did not do much of anything.  The TSX does not contain the Big Seven stocks, so it did not benefit from their boom.

My big mistake this year was my expectation that interest rates would fall.  They did, but not on the timeline I expected.

The Bank of Canada raised interest rates three times in 2023, buy 25 basis points each time, on January 25, June 7, and July 12, to end the summer and the year at an overnight rate of 5.00%

The market continued to raise rates until October 3, when they peaked and then dropped significantly.  The five year Canadian Bond Yield started the year at 3.375%, was 4.45% on October 3, and closed the year at 3.168%.  So, I was right; interest rates did fall, but not as fast as I expected, so my bond investments made money, but not much.

My portfolio included:

  • CLG
  • XSB
  • XGB
  • XLB

That’s a bond ladder, and each of those ETFs paid interest all year, and generated a slightly positive increase in the ETF price, but it wasn’t much.  In hindsight, I should have stayed in cash until October and bought all of those ETFs; my gain would have been much higher.

Oh well, we’ve proven what we already know: it’s not enough to get the direction correct; timing is also important.

My gold holdings did okay.

The big winner in 2023 was Bitcoin, but I didn’t own any Bitcoin securities in 2023, so I didn’t benefit from that increase.

Predictions for 2024

My expectation for 2024 is a recession.  I know I said that last year and was wrong, but I believe I was wrong about the timing, not the direction.

Interest rates are higher than two years ago, so there will be a wave in 2024 and 2025 of mortgage renewals at much higher rates.  That’s not good for the economy.  Unemployment is increasing.  That’s also not good.  The stock market appears over-extended, so I expect a correction.  If we do enter a recession, the Fed and the Bank of Canada will cut rates, because that’s what they do, and that will be the indicator to sell bonds, which is what I expect to do before the summer.

So where do you park your money?

Gold is looking good for 2024 so that deserves some allocation.

What will Bitcoin do?  If history is any indication, I have no idea.

The big question is, when the spot ETFs are approved in early January, will that be a “sell the news” event?  My guess is there will be a pop-up when the news is announced, but Bitcoin is up over 150% in 2023, which tells me that the Big Boyz are front-running the ETF approval and will sell when the news is announced.

Bitcoin would have to increase by almost 60% from current levels to return to its all-time high, so it has a lot of room to run.  It is not over-extended.

So, if you want to play it, the logical approach is to Dollar Cost Average, buying some every week, or month, and ride it out.  I have not yet decided what approach I will take.

So, to summarize, I have no idea what will happen in 2024, but neither does anyone else.

Happy new year, and good luck to all in 2024.